Wall Street tweaks expectations for Occidental, Apache

By Claudia Assis

Occidental Petroleum Corp.
/quotes/zigman/236880/quotes/nls/oxyOXY shares have rallied recently as the company floated ideas to break itself up, but analysts at Sterne Agee downgraded the stock to neutral on Wednesday saying there’s too much uncertainty clouding the company’s future.

In the other end of the spectrum, Deutsche Bank analysts upgraded Apache Corp.
/quotes/zigman/218137/quotes/nls/apaAPA stock to buy from neutral, saying they are “willing to side with management” as the company continues to shed assets and look for sharper focus.

At Occidental, plans to become a smaller, high growth, and U.S.-focused exploration and production company “remain an intriguing long-term preposition,” but uncertainty as shares approach Sterne Agee’s $97 target price is reason enough to call for a pause in the near term, the analysts said.

Occidental’s Chief Executive Stephen Chazen won a power struggle with former Chairman Ray Irani last month. Analysts have said Occidental has plans for a spinoff, but the company has kept mum about it to the broader public.

Occidental has underperformed energy rivals in the S&P 500 index, but it has closed that gap. Shares are up 15% in the past 12 months, compared with 26% for the energy sector. In the past three months, shares rose 13%.

At Apache, the story is also potential change via restructuring. Apache has been selling assets, with a target of $4 billion. “Growth (particularly via acquisition) has been central to [Apache's] business model,” the analysts at Deutsche Bank said, and the shift to sell assets “an acknowledgment of the limits of growth” for a smaller producer, they said.

Management has billed the asset sales underway as a “phase 1″ of a larger program and several asset packages are on the table, the analysts said. Deepwater assets in Gulf of Mexico are worth $2.5 billion to $3.1 billion. Apache could also sell assets in Argentina and Egypt, they said. At Apache, “shrink to grow … is the endgame,” the Deutsche Bank analysts said.

Apache shares have advanced 5.4% in the past 12 months, and nearly 18% in the past three months.

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